Second quarter report 2020 · 2020-07-17 · 1 Ericsson | Second quarter report 2020 Second quarter...

1 Ericsson | Second quarter report 2020

Second quarter report 2020 Stockholm, July 17, 2020

Second quarter highlights

– Sales were SEK 55.6 (54.8) b. Sales adjusted for comparable units and currency were flat YoY.

– Gross margin excluding restructuring charges improved to 38.2% (36.7%), including the earlier communicated inventory write-down related to Mainland China (SEK -0.9 b., which equals to -1.6 percentage points).

– Operating income excluding restructuring charges improved to SEK 4.5 b. (8.2% operating margin) from SEK 3.9 b. (7.0% operating margin) driven by improvements in segment Digital Services.

– Networks sales1 increased by 4% YoY. Networks operating margin excluding restructuring charges was 14.1% (15.0%) impacted by strategic contracts and the inventory write-down, partly compensated by operational leverage and a favorable business mix.

– Digital Services operating income excluding restructuring charges was SEK -0.7 (-1.3) b. Gross margin improved driven mainly by higher software sales while sales1 declined by -5%.

– Net income was SEK 2.6 (1.8) b.

– Free cash flow before M&A was SEK 3.2 (1.6) b. Net cash June 30, 2020, was SEK 37.5 (33.8) b.

– The Covid-19 pandemic had a limited impact on operating income and cash flow in the quarter. 1 Adjusted for comparable units and currency.

Planning assumptions highlights (please see page 5 for complete planning assumptions)

– With current visibility Group financial targets for 2020 and 2022 are maintained.

– R&D investments in Digital Services are accelerated to capture additional business opportunities. In combination with lower sales, this will likely cause a delay of some quarters in reaching the 2020 financial target. 2022 operating margin target of 10-12% remains firm.

1 Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report. 2 Excludes restructuring charges in all periods. No other adjustments made in 2020. Jan-Jun 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.).

SEK b.Q2

2020Q2

2019YoY

changeQ1

2020QoQ

changeJan-Jun

2020Jan-Jun

2019YoY

changeNet sales 55.6 54.8 1% 49.8 12% 105.3 103.7 2%

Sales growth adj. for comparable units and currency - - 0% - - - - -1%

Gross margin 37.6% 36.6% - 39.8% - 38.6% 37.5% -

Operating income 3.9 3.7 3% 4.3 -11% 8.2 8.6 -6%

Operating margin 6.9% 6.8% - 8.7% - 7.7% 8.3% -

Net income 2.6 1.8 40% 2.3 13% 4.9 4.3 14%

EPS diluted, SEK 0.74 0.51 45% 0.65 14% 1.39 1.21 15%

Measures excl. restructuring charges and other items affecting comparability ¹Gross margin excluding restructuring charges 38.2% 36.7% - 40.4% - 39.3% 37.5% -

Operating income excl. restr. charges & items affecting comparability in 2019 ² 4.5 3.9 18% 4.6 -2% 9.1 7.4 24%

Operating margin excl. restr. charges & items affecting comparability in 2019 ² 8.2% 7.0% - 9.3% - 8.7% 7.1% -

Free cash flow before M&A 3.2 1.6 102% 2.3 40% 5.6 5.1 10%

Net cash, end of period 37.5 33.8 11% 38.4 -2% 37.5 33.8 11%

2 Ericsson | Second quarter report 2020 CEO comments

CEO comments

The human toll caused by Covid-19, directly and indirectly through a weak economy, is increasingly clear. We continue to put safety of our people as first priority, and more than 80% of our employees are currently working from home. Despite the difficult environment we delivered a solid result. Q2 organic1 sales were flat and gross margin2 improved to 38.2% (36.7%) YoY, including negative effects from strategic contracts. Free cash flow before M&A improved to SEK 3.2 (1.6) b. While the effects of Covid-19 create uncertainties, with current visibility we maintain the full-year targets for the Group.

Networks grew by 4% organically1 and the gross margin2 was 40.5% (41.4%), absorbing a larger share of strategic contracts including 5G volumes in Mainland China where we also took an inventory write-down. The strengthened market position in Mainland China is strategically important as this market is expected to be a driver of critical future requirements and provide us with important scale. The Chinese 5G contracts are expected to be profitable over the life cycle, but had a negative contribution to gross margin in Q2.

Investments in R&D have established us as a leader in 5G, with proven performance and cost of ownership benefits for our customers. We have continued to increase our market share in several markets by leveraging our competitive product portfolio. Profitability in earlier awarded strategic contracts has improved according to plan. We consider strategic contracts to be a natural part of the business and we will stop our forward looking commentary unless there is an extraordinary impact.

Digital Services continues to execute on its turnaround plan with continuous improvements in the underlying business, and a Q2 gross margin2 reaching 43.6% (37.1%), supported by increased software sales. Sales is being impacted by the declining legacy portfolio and Covid-19-related market uncertainty and we expect this negative impact to continue throughout the year. There is however a strong demand for our cloud-native and 5G portfolio, and we have recorded several important tier 1 customer wins in 5G Core that will generate revenues in 2021 and beyond. Encouraged by the success of our offering, we have decided to accelerate R&D investments. These investments have a positive long-term value but will result in increased R&D costs. We are for this reason, in combination with the lower sales, likely to see a delay of some quarters in reaching the 2020 target of low single-digit margin for Digital Services, however, we are staying firm on our 2022 operating margin2 target of 10-12%.

Our patent licensing business continues to perform well due to our strong IPR portfolio. Licensing agreements are often multi-year and term-based and renewals normally require negotiations, particularly in conjunction with introducing new standards such as 5G. Next year, certain agreements are up for renewal and royalty payments can be temporarily affected. The inclusion of 5G patents is expected to strengthen our IPR business further.

At Ericsson, we are committed to conducting business responsibly and with integrity. We continue our efforts to strengthen and improve our Ethics and Compliance program. In the quarter, the three-year term of the monitorship under the resolution with the U.S. authorities started. We look forward to working together with the independent compliance monitor and to benefit from his extensive experience. We fully believe this will help us reach our ambitions.

As we prepare to exit the crisis caused by Covid-19, there is a need to restart economies and make strategic, forward looking investments which we suggest must include the future digital infrastructure. We see many regions around the world increasing investments in this space and as a European company we are concerned that Europe will fall behind. As critical national infrastructure, 5G will be a key determinant for long-term competitiveness of the general economy, and act as a stimulant to accelerate economic growth, attract future investments and speed up technology innovation. I believe Europe must prioritize actions to incentivize investments in the digital infrastructure, to include lowering the cost and speeding up the availability of spectrum.

We are ready to deliver on the promises of 5G, based on our strong 5G portfolio and a resilient balance sheet. We remain positive on the longer-term outlook. Some customers are accelerating their investments while others are temporarily cautious. With current visibility we maintain the Group targets for 2020 and 2022.

Stay healthy and well.

Börje Ekholm President and CEO 1 Sales adjusted for comparable units and currency 2 Excluding restructuring charges

3 Ericsson | Second quarter report 2020 Financial highlights

Financial highlights

Net sales development

1 Sales growth adjusted for comparable units and currency. Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.

Group reported sales increased by 1% YoY. Sales growth adjusted for comparable units and currency was 0%. 5G deployments in North East Asia contributed positively. Sales in India and Latin America declined, partly due to Covid-19 and macroeconomic instability.

Networks sales adjusted for comparable units and currency increased by 4% YoY with growth in North America and North East Asia while sales declined in Latin America and India.

Digital Services sales adjusted for comparable units and currency decreased by -5% YoY with reduced sales of services and hardware, partly offset by higher sales of software. Services sales declined partly due to Covid-19.

Managed Services sales adjusted for comparable units and currency decreased by -12% YoY, mainly due to lower variable sales in a managed services contract in North America post the merger between two larger operators, and transfer of a managed services contract to Ericsson Nikola Tesla d.d. (an associated company where Ericsson has a 49% ownership).

Emerging Business and Other sales adjusted for comparable units and currency decreased by -6% YoY mainly due to lower sales in Red Bee Media.

IPR licensing revenues increased to SEK 2.8 (2.2) b. YoY mainly due to new contracts signed in the second half of 2019. IPR licensing revenues increased from SEK 2.5 b. QoQ mainly due to quarterly fluctuations in the timing of revenues in certain contracts.

Sequentially, Group reported sales increased by 12% following seasonality and ramp up of 5G deployments in Mainland China.

Income and margin development

1 Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report. 2 Excludes restructuring charges in all periods. No other adjustments made in 2020. Jan-Jun 2019 excludes a capital gain related to the divestment of 51% of MediaKind (SEK 0.7 b.), divestment of certain assets in Red Bee Media (SEK 0.1 b.) and a reversal of an earlier provision for impairment of trade receivables following customer payment (SEK 0.7 b.).

Gross margin Gross margin was 37.6% (36.6%). Gross margin excluding restructuring charges improved to 38.2% (36.7%) YoY driven by improvements in Digital Services and Managed Services, as well as a higher share of IPR licensing revenues. A higher share of software

sales contributed to the improvement in Digital Services. Managed Services gross margin improved mainly as an effect of efficiency gains. Networks gross margin declined due to a write-down of SEK -0.9 b. for pre-commercial product inventory for the Chinese market as well as a larger share of strategic contracts including 5G

SEK b. Q2

2020 Q2

2019 YoY

change YoY adj.¹

Q12020

QoQ change

Jan-Jun2020

Jan-Jun2019

YoY change

YoY adj.¹

Net sales 55.6 54.8 1% 0% 49.8 12% 105.3 103.7 2% -1%

of which Networks 39.8 37.8 5% 4% 35.1 13% 75.0 71.3 5% 2%

of which Digital Services 8.6 9.0 -5% -5% 7.3 17% 15.9 16.8 -5% -7%

of which Managed Services 5.6 6.3 -12% -12% 5.7 -2% 11.3 12.2 -7% -9%

of which Emerging Business and Other 1.6 1.7 -4% -6% 1.6 2% 3.2 3.4 -8% -7%

SEK b. Q2

2020 Q2

2019 YoY

change Q1

2020 QoQ

change Jan-Jun

2020 Jan-Jun

2019 YoY

change Net sales 55.6 54.8 1% 49.8 12% 105.3 103.7 2%

Gross income 20.9 20.1 4% 19.8 6% 40.7 38.9 5%

Gross margin 37.6% 36.6% - 39.8% - 38.6% 37.5% -

Research and development (R&D) expenses -10.0 -9.5 - -9.1 - -19.2 -18.7 -

Selling and administrative expenses -7.1 -7.0 - -6.2 - -13.3 -13.0 -

Impairment losses on trade receivables 0.0 0.2 -72% -0.2 - -0.1 0.7 -

Other operating income and expenses 0.1 0.1 98% 0.1 47% 0.2 0.8 -74%

Operating income 3.9 3.7 3% 4.3 -11% 8.2 8.6 -6%

of which Networks 5.3 5.7 -7% 5.8 -10% 11.1 11.2 -1%

of which Digital Services -0.7 -1.4 - -1.4 - -2.1 -3.2 -

of which Managed Services 0.3 0.2 30% 0.4 -36% 0.7 1.5 -54%

of which Emerging Business & Other -1.0 -0.7 - -0.5 - -1.5 -0.8 -

Operating margin 6.9% 6.8% - 8.7% - 7.7% 8.3% -

Financial income and expenses, net 0.3 -0.4 - -0.9 - -0.6 -1.0 -

Taxes -1.6 -1.5 - -1.1 - -2.7 -3.3 -

Net income 2.6 1.8 40% 2.3 13% 4.9 4.3 14%

Restructuring charges -0.7 -0.1 - -0.3 - -1.0 -0.3 -

Measures excl. restructuring charges and other items affecting comparability ¹Gross margin excluding restructuring charges 38.2% 36.7% - 40.4% - 39.3% 37.5% -

Operating income excl. restr. charges & items affecting comparability in 2019 ² 4.5 3.9 18% 4.6 -2% 9.1 7.4 24%

Operating margin excl. restr. charges & items affecting comparability in 2019 ² 8.2% 7.0% - 9.3% - 8.7% 7.1% -

Operating margin excluding restructuring charges 8.2% 7.0% - 9.3% - 8.7% 8.6% -


in Mainland China. This was partly offset by a favorable business mix and operational leverage.

Sequentially, gross margin decreased to 37.6% from 39.8%. Gross margin excluding restructuring charges decreased to 38.2% from 40.4% impacted by the inventory write-down of SEK -0.9 b. related to Mainland China. Digital Services gross margin improved supported by lower costs for the remaining critical contracts. Managed Services gross margin declined due to timing of costs. The share of IPR licensing revenues remained stable between the quarters with no effect on gross margin QoQ.

Restructuring charges Restructuring charges increased to SEK -0.7 (-0.1) b. YoY. Exit of the Edge Gravity business in segment Emerging Business and Other as well as the ongoing restructuring of the acquired antenna and filter business in segment Networks impacted restructuring charges in the quarter. Research and development (R&D) expenses R&D expenses increased to SEK -10.0 (-9.5) b. R&D expenses excluding restructuring charges were SEK -9.8 (-9.5) b. R&D expenses increased in segment Networks, while they declined in Digital Services due to a lower net negative impact from capitalized and amortized development expenses.

Selling and administrative (SG&A) expenses SG&A expenses were SEK -7.1 (-7.0) b. SG&A expenses excluding restructuring charges were flat at SEK -6.9 (-6.9) b. with increased investments in digitalization and compliance. Revaluation of customer financing was SEK 0.0 (-0.2) b.

Impairment losses on trade receivables Impairment losses on trade receivables were SEK 0.0 (0.2) b.

Other operating income and expenses Other operating income and expenses was SEK 0.1 (0.1) b. Share in earnings of JVs and associated companies was SEK -0.2 (-0.1) b.

Operating income and margin Operating income improved to SEK 3.9 (3.7) b. YoY. Operating income excluding restructuring charges improved to SEK 4.5 (3.9) b. with a corresponding operating margin improvement to 8.2% (7.0%). The income improvement was driven by Digital Services.

Sequentially, operating income declined to SEK 3.9 b. from SEK 4.3 b. Operating income excluding restructuring charges declined slightly to SEK 4.5 b. from SEK 4.6 b. Increased sales were offset by a reduced gross margin and by seasonally higher operating expenses.

Financial net Financial net improved to SEK 0.3 (-0.4) b. YoY and from SEK -0.9 b. QoQ, mainly due to positive currency hedge effects following the strengthened SEK to USD. The currency hedge effect was SEK 0.6 b. compared with SEK 0.0 b. in Q2 2019 and SEK -0.5 b. in Q1 2020. The SEK strengthened against the USD between March 31, 2020 (SEK/USD rate 10.13) and June 30, 2020 (SEK/USD rate 9.37).

Taxes Taxes were SEK -1.6 (-1.5) b. The tax rate in Q2 was 38% compared with 33% in Q1 2020. The increase is due to an increase in non-deductible costs this quarter.

Net income Net income improved to SEK 2.6 (1.8) b. and EPS diluted improved to SEK 0.74 (0.51) YoY driven by the stronger operating income and the improved financial net.

Employees The number of employees on June 30, 2020, was 99,800, a net increase of 705 employees in the quarter. The increase is mainly in R&D and service delivery.

Financial highlights, year to date (Jan-June) development Reported sales increased by 2%. Sales adjusted for comparable units and currency decreased by -1% mainly due to lower services and legacy hardware sales in Digital Services, as well as contract exits in Managed Services. There has been limited negative impact on sales from the Covid-19 pandemic year to date. Networks sales adjusted for comparable units and currency increased by 2%. In the market area dimension, growth in North East Asia and North America has been offset by a decline in market area South East Asia, Oceania and India and in market area Europe and Latin America.

Gross margin increased to 38.6% (37.5%) driven by improvements in Digital Services, mainly due to a sales mix with a higher share of software.

Operating income declined YoY to SEK 8.2 (8.6) b. impacted by increased restructuring charges of SEK -1.0 (-0.3) b. In addition, operating income Q1 2019 was positively impacted by capital gains (SEK 0.8 b.) related to the media businesses, and a reversal of a provision for impairment of trade receivables (SEK 0.7 b.) following customer payment.

Net income year to date improved to SEK 4.9 (4.3) b. supported by an improved financial income and expenses net of SEK -0.6 (-1.0) b.


Planning assumptions

Market related – The RAN equipment market is estimated to grow by 4% for full-year 2020

(Source: Dell’Oro May 2020) with 0% CAGR for 2019-2024 (Source: Dell’Oro Jan 2020).

– The momentum in North America remains strong and the market is estimated to grow 4% in 2020 (Source: Dell’Oro). The momentum is supported by the merger between two larger operators, upcoming spectrum auctions and an overall demand for 5G.

Ericsson related Financial targets – While the effects of Covid-19 create uncertainties, with current visibility Ericsson

sees no reason to adjust 2020 and 2022 full-year targets for the Group. – R&D investments in Digital Services are accelerated to capture additional

business opportunities. In combination with lower sales, this will likely cause a delay of some quarters in reaching the 2020 target of low single-digit margin for the segment. The 2022 operating margin target for Digital Services of 10-12% remains firm.

Net sales – Three-year average reported sales seasonality between Q2 and Q3 is 4%. – The revenues from current IPR licensing contract portfolio are approximately

SEK 10 b. on an annual basis.

Gross margin – The acquired antenna and filter business is expected to have a negative impact

on Networks margins in 2020, with a gradual improvement during 2H. – The improvements in Digital Services continue, but earnings will vary between

quarters depending on business mix, sales seasonality and impact of the remainder of the 45 critical contracts.

– In Managed Services there will be quarterly variations depending on timing of add-on sales and costs, but underlying margins have been established at a higher level.

R&D and SG&A expenses – Expenses typically decrease between Q2 and Q3 due to seasonality. – Investments in R&D will continue in line with the focused business strategy. – Investments in digitalization, compliance and security will continue to impact

SG&A. Somewhat higher expenses are expected for full-year 2020.

Restructuring charges – Restructuring charges for full-year 2020 are estimated to be ~1% of sales.

Currency exposure – Rule of thumb: A change by 10% of USD to SEK would have an impact of

approximately +/-5% on net sales and approximately +/-1 percentage point on operating margin.

6 Ericsson | Second quarter report 2020 Market area sales

Market area sales

1 Market area “Other” includes primarily IPR licensing revenues and the major part of segment Emerging Business and Other. Sales breakdown by market area by segment is available in the back-end tables.

– Ericsson 5G status on July 17; 54 live networks and 99 commercial agreements with unique operators.

– Strong growth in North East Asia and continued business momentum in North America.

– Networks sales continued to grow in Europe, demonstrating our strong product offering.

South East Asia, Oceania and India Sales declined YoY in Networks due to timing of project deliveries. Sales in India declined mainly due to Covid-19. Managed Services remained stable while Digital Services sales increased YoY due to timing of project milestones.

North East Asia Sales increased YoY. Networks sales grew, primarily driven by 5G deployment in Mainland China and increased business volumes across the market area. Digital Services sales increased driven by strong sales in Mainland China.

North America Sales increased YoY. Networks sales grew driven by continued 5G momentum. Digital Services sales decreased due to lower hardware volumes. Managed Services sales decreased, with declining variable sales, post the merger between two larger operators. Europe and Latin America Sales decreased YoY due to earlier decisions on Managed Services contract exits and reduced sales in Latin America due to the macroeconomic uncertainty following Covid-19. Networks sales increased in Europe as a result of market share gains, partly offsetting the sales decline in Latin America. Middle East and Africa Sales decreased YoY primarily due to macroeconomic uncertainty and delayed investments in Networks and Digital Services. Continued 5G deployments in the Middle East contributed positively. Managed Services sales were stable. Other IPR licensing revenues grew to SEK 2.8 (2.2) b. mainly due to new contracts signed in the second half of 2019.

SEK b.Q2

2020Q2

2019YoY

changeQ1

2020QoQ

changeJan-Jun

2020YoY

changeSouth East Asia, Oceania and India 6.6 7.0 -5% 5.9 11% 12.5 -5%

North East Asia 7.8 6.5 20% 3.9 99% 11.7 13%

North America 18.4 17.7 4% 17.9 3% 36.3 7%

Europe and Latin America 13.1 14.1 -7% 12.2 7% 25.3 -7%

Middle East and Africa 5.4 5.6 -4% 5.8 -7% 11.3 2%

Other ¹ 4.3 3.9 10% 3.9 9% 8.3 1%

Total 55.6 54.8 1% 49.8 12% 105.3 2%

7 Ericsson | Second quarter report 2020 Segment results

Segment results

Segment Networks

Breakdown of sales into products, services and IPR licensing is available in the back-end tables.

– Continued strong momentum for 5G. – Continued investments in technology leadership are

important to drive gross margin improvements. – Operational leverage and favorable business mix partly

mitigated the negative impact from strategic contracts.

Net sales Reported sales increased by 5% YoY, while sales adjusted for comparable units and currency increased by 4%. Sales growth was strong YoY in North America and North East Asia while sales declined YoY in Latin America and India.

Sales increased by 13% QoQ. Growth is mainly driven by 5G investments in North East Asia across several countries.

Gross margin Gross margin declined to 40.2% (41.4%) YoY. Gross margin excluding restructuring charges declined to 40.5% (41.4%), as a result of an inventory write-down of SEK -0.9 b. for pre-commercial product inventory for the Chinese market and a larger share of strategic contracts including 5G in Mainland China. A favorable business mix, operational leverage and higher IPR licensing revenues had a positive impact on gross margin YoY.

Gross margin excluding restructuring charges decreased to 40.5% from 44.6% QoQ driven by the inventory write-down in Mainland China as well as a larger share of strategic contracts.

Operating income and margin Operating income decreased to SEK 5.3 (5.7) b. YoY while operating margin decreased to 13.2% (15.0%). Operating margin excluding restructuring charges decreased to 14.1% (15.0%), including a continued negative impact of the acquired antenna and filter business of SEK -0.3 b. Operating expenses increased by SEK -0.8 b., including SEK -0.3 b. of restructuring charges, accelerated R&D investments in 5G and in a broader portfolio of antenna and site solutions as well as an increase in SG&A expenses driven by the increased Group investments in digitalization and compliance.

Operating income excluding restructuring charges declined by SEK -0.3 b. QoQ, while operating margin excluding restructuring charges decreased to 14.1% from 16.8% QoQ. The negative impact from the acquired antenna and filter business remained flat at SEK -0.3 b. QoQ.

Net sales rolling four quarters were SEK 158.7 b. and operating margin excluding restructuring charges was 15.9%.

Segment Digital Services

Breakdown of sales into products, services and IPR licensing is available in the back-end tables.

– Gross margin improved to 43.6% (36.8%) YoY supported by a favorable sales mix with a higher share of software.

– Sales declined due to lower services and hardware sales. – The new portfolio sales grew by 18% in the quarter mainly

driven by Cloud Core.

Net sales Sales as reported and sales adjusted for comparable units and currency both decreased by -5% YoY with reduced sales of services and hardware, partly offset by higher software sales. Services sales declined partly due to market uncertainty related to Covid-19.

The business momentum is strong for the new portfolio which grew by 18% in the quarter and 10% rolling 12 months. Sales of Core products were strong in the quarter and important 5G Core contracts have been signed with several tier 1 operators in 2020, expected to generate revenues in 2021 and beyond.

Gross margin Gross margin increased to 43.6% (36.8%) YoY supported by a business mix with a higher share of software sales. In addition, increased IPR licensing revenues and lower negative impact from the critical contracts contributed positively.

Gross margin excluding restructuring charges increased to 43.6% from 40.1% QoQ. Q1 2020 was negatively impacted by SEK -0.2 b. in costs from one of the critical contracts while the impact in Q2 2020 was limited. Increased sales had a positive impact on gross margin QoQ.

Operating income (loss) Operating income (loss) was SEK -0.7 (-1.4) b. Operating income (loss) excluding restructuring charges was SEK -0.7 (-1.3) b. The negative impact from lower sales was compensated by a stronger gross margin. Operating expenses excluding restructuring charges declined by SEK -0.2 b. YoY due to a lower net negative impact from capitalized and amortized development expenses (SEK 0.0 b. Q2 2020 compared with SEK -0.3 b. Q2 2019). While rationalization of the legacy portfolio continues, R&D investments are made in the new portfolio of 5G and cloud-native products.

Operating income excluding restructuring charges improved QoQ supported by seasonally higher sales and a stronger gross margin.

Net sales rolling four quarters were SEK 39.0 b. and operating margin excluding restructuring charges was -6.8%.

SEK b.Q2

2020 Q2

2019 YoY

change Q1

2020 Net sales 39.8 37.8 5% 35.1

Sales growth adj. for comparable units and FX - - 4% -

Gross income 16.0 15.7 2% 15.6

Gross margin 40.2% 41.4% - 44.4%

Operating income 5.3 5.7 -7% 5.8

Operating margin 13.2% 15.0% - 16.6%

Restructuring charges -0.4 0.0 - -0.1

Measures excl. restructuring charges

Gross margin excl. restructuring charges 40.5% 41.4% - 44.6%

Operating income excl. restructuring charges 5.6 5.7 -1% 5.9

Operating margin excl. restructuring charges 14.1% 15.0% - 16.8%

SEK b. Q2

2020 Q2

2019 YoY

change Q1

2020 Net sales 8.6 9.0 -5% 7.3

Sales growth adj. for comparable units and FX - - -5% -

Gross income 3.7 3.3 13% 2.9

Gross margin 43.6% 36.8% - 39.9%

Operating income (loss) -0.7 -1.4 - -1.4

Operating margin -8.1% -15.6% - -19.3%

Restructuring charges 0.0 -0.1 - 0.0



Operating income (loss) excl. restructuring charges -0.7 -1.3 - -1.4

Operating margin excl. restructuring charges -8.5% -14.6% - -19.6%

8 Ericsson | Second quarter report 2020 Segment results

Segment Managed Services

– Sales declined YoY mainly due to reduced variable sales. – Gross margin excl. restr. charges increased YoY mainly as a

result of efficiency gains. – Further investments in automation, analytics and AI-driven

offerings – supporting 5G and efficiency in service delivery.

Net sales Reported sales declined by -12% YoY. Sales adjusted for comparable units and currency decreased by -12% YoY, mainly due to reduced variable sales in a large contract in North America post the merger between two larger operators, and transfer of a contract from Ericsson to Ericsson Nikola Tesla d.d. (an associated company where Ericsson has a 49% ownership).

Gross margin Gross margin excluding restructuring charges increased to 17.2% (12.3%) YoY, mainly as a result of efficiency gains.

Gross margin excluding restructuring charges decreased to 17.2% from 20.6% QoQ due to lower sales and seasonally lower costs in Q1.

Gross margin excluding restructuring charges rolling four quarters was 17.6%, a continued increase driven by efficiency gains and automation investments.

Operating income and margin Operating income excluding restructuring charges was SEK 0.3 (0.2) b. The improvement was driven by higher gross margin.

Operating income excluding restructuring charges declined to SEK 0.3 b. from SEK 0.7 b. QoQ due to seasonally lower costs in Q1 and continued investments in R&D.

Net sales rolling four quarters were SEK 24.7 b. Operating margin excluding restructuring charges rolling four quarters was 7.4%.

Segment Emerging Business and Other

Net sales Reported sales decreased by -4% YoY. Sales adjusted for comparable units and currency decreased by -6% mainly due to lower sales in Red Bee Media. Sales in Emerging Business increased slightly.

Gross margin Gross margin decreased to 12.6% (18.5%) YoY. Gross margin excluding restructuring charges increased to 25.3% (19.2%). The increase was driven by Emerging Business. Gross margin decreased to 12.6% from 21.7% QoQ. Gross margin excluding restructuring charges increased to 25.3% from 21.9% QoQ. The improvement was driven by reduced project losses in the legacy media business. Operating income (loss) Operating income (loss) excluding restructuring charges was SEK -0.6 (-0.7) b.

Media Solutions operating income was SEK -0.1 (-0.1) b. Operating income includes Ericsson’s 49% share in earnings of the MediaKind business.

Red Bee Media operating income improved as a result of lower operating expenses.

Operating income included restructuring charges of SEK -0.3 b. related to the exit of Edge Gravity (edge content delivery business) in Q2 2020.

Net sales rolling four quarters were SEK 6.5 b.

SEK b. Q2

2020 Q2

2019 YoY

change Q1

2020 Net sales 5.6 6.3 -12% 5.7


Gross income 1.0 0.8 23% 0.9

Gross margin 17.1% 12.3% - 16.3%

Operating income 0.3 0.2 30% 0.4

Operating margin 4.7% 3.2% - 7.1%

Restructuring charges 0.0 0.0 - -0.2



Operating income excl. restructuring charges 0.3 0.2 31% 0.7

Operating margin excl. restructuring charges 4.8% 3.2% - 11.4%

SEK b. Q2

2020 Q2

2019 YoY

change Q1

2020 Net sales 1.6 1.7 -4% 1.6

Of which Emerging Business and iconectiv 1.1 1.0 3% 1.1

Of which Red Bee Media 0.5 0.6 -15% 0.6

Of which Media Solutions 0.0 0.0 - -0.1


Gross income 0.2 0.3 -35% 0.3

Gross margin 12.6% 18.5% - 21.7%

Operating income (loss) -1.0 -0.7 - -0.5

Of which Em. Business, iconectiv & common costs -0.8 -0.6 - -0.4

Of which Red Bee Media 0.0 0.0 - 0.0

Of which Media Solutions -0.1 -0.1 - -0.1

Operating margin -60.5% -44.1% - -32.7%

Restructuring charges -0.3 0.0 - 0.0



Operating income (loss) excl. restructuring charges -0.6 -0.7 - -0.5

Operating margin excl. restructuring charges -39.6% -42.8% - -32.7%

– Continued sales and gross margin growth in Emerging Business.

– Operating income excl. restructuring charges improved YoY. – iconectiv delivered stable sales and solid profitability.

9 Ericsson | Second quarter report 2020 Cash flow

Cash flow and financial position

Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.

– Free cash flow before M&A was SEK 3.2 (1.6) b. – Solid net cash position at SEK 37.5 (33.8) b. – Moody’s upgraded Ericsson’s ratings to Ba1 with stable

outlook.

Cash flow from operating activities Cash flow from operating activities was SEK 5.4 (3.6) b. Despite sales growth, net operating assets and liabilities remained stable in the quarter. Provisions of SEK 2.1 b. were utilized of which SEK 0.1 b. was related to restructuring. A payment of SEK -1.0 b. was made into the Swedish Pension Trust, as described under “Financial position” below.

Free cash flow Free cash flow before M&A was SEK 3.2 (1.6) b. Investments in property, plant and equipment were SEK -1.3 (-1.1) b. and capitalized development expenses were SEK -0.2 (-0.4) b.

Free cash flow was SEK 3.2 (1.6) b.

Cash flow from investing and financing activities Cash flow from investing activities was SEK -0.5 (1.0) b.

Cash flow from financing activities was SEK -4.6 (-4.6) b. Payment of dividends of SEK -2.5 b. were made in the quarter. The dividend is paid in two equal instalments, SEK 0.75 per share in April and SEK 0.75 per share with the record date October 2, 2020.

Cash flow, year to date (Jan-June) development Free cash flow before M&A year to date was SEK 5.6 (5.1) b. supported by cash flow from operating activities of SEK 9.8 (9.4) b.

Cash flow from investing activities was SEK -5.5 (4.3) b. mainly due to purchase of interest-bearing securities while investments in

property, plant and equipment and capitalized development expenses remained stable YoY.

Cash flow from financing activities was SEK -3.1 (-7.2) b. of which payment of dividends was SEK -2.5 (-4.3) b.

Financial position Gross cash was SEK 75.4 (69.0) b. Gross cash declined by SEK -4.1 b. QoQ mainly as a result of the payment of dividends. Net cash was SEK 37.5 (33.8) b. and decreased by SEK -0.8 b. QoQ.

Liabilities for post-employment benefits decreased in the quarter, to SEK 38.6 b. from SEK 43.0 b., due to higher interest rates in Sweden and due to a payment of SEK -1.0 b. made into the Swedish Pension Trust. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 10.8 b. lower.

As reported in the Q1 2020 earnings report there is a funding need for the Swedish pension plan in 2020. The total need is approximately SEK 4 b. of which SEK 3 b. will be covered by payments into the Swedish Pension Trust. In Q2, SEK 1 b. was paid into the trust and SEK 2 b. is expected to be paid in Q3 2020. The remaining SEK 1 b. funding need is covered by providing a pledged business mortgage to PRI Pensionsgaranti. Details regarding Ericsson’s pension plans can be found in note G1 of the Annual Report.

The average maturity of long-term borrowings as of June 30, 2020, was 2.2 years, a decrease from 2.9 years 12 months earlier.

On June 15, 2020, Moody’s upgraded Ericsson’s ratings to Ba1 with stable outlook.

SEK b.Q2

2020 Q2

2019 Q1

2020 Jan-Jun

2020 Jan-Jun

2019 Net income adjusted for non-cash items 5.6 5.0 4.7 10.3 10.4

Working capital changes (net operating assets and liabilities) -0.1 -1.3 -0.4 -0.6 -1.0

Cash flow from operating activities 5.4 3.6 4.3 9.8 9.4

Capex (net) including product development -1.5 -1.4 -1.3 -2.8 -2.9

Other investing activities and lease liabilities -0.7 -0.7 -0.6 -1.4 -1.4

Free cash flow before M&A 3.2 1.6 2.3 5.6 5.1

Acquisitions/divestments, net 0.0 0.0 -0.2 -0.3 0.3

Free cash flow 3.2 1.6 2.1 5.3 5.4

Cash flow from investing activities -0.5 1.0 -5.0 -5.5 4.3

Cash flow from financing activities -4.6 -4.6 1.4 -3.1 -7.2

Net change in cash and cash equivalents -2.7 0.0 3.3 0.6 7.1

SEK b.Jun 30

2020 Jun 30

2019 Mar 31

2020 Gross cash 75.4 69.0 79.5

- Borrowings, current 15.3 2.2 17.8

- Borrowings, non-current 22.6 33.0 23.4

Net cash 37.5 33.8 38.4

Equity 78.5 84.5 79.1

Total assets 276.8 280.4 292.3

Capital turnover (times) 1.3 1.3 1.2

Return on capital employed (%) 9.9% 11.0% 10.2%

10 Ericsson | Second quarter report 2020 Parent Company

Parent Company

Income after financial items Jan-June, 2020, was SEK 2.3 (0.8) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 63.3 (51.1) b.

There was a decrease in intercompany lending of SEK 1.0 b. and in intercompany borrowing of SEK 1.5 b. in the second quarter.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 4,923,514 shares from treasury stock were distributed or sold to employees during the second quarter. The holding of treasury stock on June 30, 2020 was 10,532,902 Class B shares.

11 Ericsson | Second quarter report 2020 Other information

Other information

Ericsson’s Nomination Committee appointed On April 23, 2020, Ericsson's Nomination Committee for the Annual General Meeting 2021 was appointed in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.

The Nomination Committee consists of: - Johan Forssell, Investor AB; - Karl Åberg, AB Industrivärden and Svenska Handelsbankens Pensionsstiftelse; - Jonas Synnergren, Cevian Capital Partners Limited; - Anders Oscarsson, AMF – Försäkring och Fonder; and - Ronnie Leten, the Chair of the Board of Directors.

Johan Forssell is the Chair of the Nomination Committee.

Arun Bansal appointed Executive Vice President of Ericsson On June 10, 2020, it was announced that Ericsson's Board of Directors has appointed Arun Bansal Executive Vice President (EVP). Bansal will remain in his position as Senior Vice President and Head of Market Area Europe & Latin America. Fredrik Jejdling, will remain as Executive Vice President and Head of Business Area Networks.

With the appointment of Arun Bansal, Ericsson will have two Executive Vice Presidents – one based in Sweden and one outside of Sweden, thus providing Ericsson with greater flexibility for Executive Vice President duties. Fredrik Jejdling will be the first EVP and Arun Bansal the second EVP.

Arun Bansal joined Ericsson in 1995 and is now head of a market area that spans over 110 countries across Europe and Latin America, a position he has held since 2017.

Covid-19 update The Covid-19 pandemic continues to impact people, society and businesses around the world. The close monitoring of the situation has continued and the Ericsson Global Crisis Management Council and task forces in each Market Area have remained activated throughout the quarter. The health and safety of employees, customers, partners and other stakeholders is Ericsson’s top priority. In June, travel and event restrictions were prolonged until the end of the year and it is also anticipated that most Ericsson employees will be working from home until year-end.

Overall, a limited impact on the Ericsson business has been seen during the first half of the year. The ability to execute early on the business continuity plans secured mitigation in supply, sourcing, logistics and service delivery. Ericsson has remained close to its customers and local suppliers, building customized plans to address specific business needs and to maintain service continuity. The dual mode production strategy and regionalized supply chains have been successful, making it possible to keep the supply chain operational.

12 Ericsson | Second quarter report 2020 Risk factors

Risk factors

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, includ-ing for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2019. Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following:

Pandemics, such as for example the one caused by the novel Coronavirus, Covid-19, could severely impact our local and global operations

Pandemics, such as for example the one caused by the novel Coronavirus, could severely impact our local and global operations related to e.g. Service Delivery, Research & Development, Sales and Supply, as well as our customers and suppliers, with significant financial and other consequences. As an example, the Coronavirus pandemic has caused challenges and risks relating to travel and lockdowns limiting access to sites, transportation and logistics and impacting the flow of goods. Although we work to put in place business continuity measures to be able to continue to support our customers’ needs and mitigate any impact to our business, disruptions to the global economy and to the operations and business of our customers, suppliers, and partners could cause disturbances in our operations and may have a material adverse effects on our business and financial position.

Our ability to benefit from intellectual property rights (IPR), may be limited by the loss of patent licenses to or from third-parties

Patent licensing agreements are generally multi-year and term based and the process for renewal of these licenses normally requires negotiations, particularly in conjunction with technology shifts and the introduction of new standards, such as 5G. Such renewals and negotiations may take time to resolve, sometimes involve litigation and may have material adverse impact on our business and financial position, including on the timing for and level of revenues from the IPR licensing contract portfolio.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors. Date for next report: October 21, 2020

13 Ericsson | Second quarter report 2020 Board assurance

Board assurance

The Board of Directors and the CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.

Stockholm, July 17, 2020 Telefonaktiebolaget LM Ericsson (publ) Org. Nr. 556016-0680

Helena Stjernholm Ronnie Leten Jacob Wallenberg Deputy Chair Chair Deputy Chair

Jon Fredrik Baksaas Jan Carlson Nora Denzel Member of the Board Member of the Board Member of the Board

Eric A. Elzvik Kurt Jofs Kristin S. Rinne Member of the Board Member of the Board Member of the Board

Börje Ekholm President, CEO and member of the Board

Torbjörn Nyman Kjell-Åke Soting Roger Svensson Member of the Board Member of the Board Member of the Board

14 Ericsson | Second quarter report 2020 Editor’s note

Editor’s note

Press briefing and live webcast Ericsson invites media, investors and analysts to a conference call on July 17, 2020 starting at 9:00 am CET. Live audio webcast of the conference call as well as supporting slides will be available at: www.ericsson.com/investors and www.ericsson.com/press Replay of the conference call will be available approximately one hour after the call has ended and will remain available for seven days.

For further information, please contact: Carl Mellander, Senior Vice President, Chief Financial Officer Phone: +46 10 713 89 70 E-mail: [email protected] or [email protected]

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer Phone: +46 10 713 65 39 E-mail: [email protected] or [email protected]

Telefonaktiebolaget LM Ericsson Org. number: 556016-0680 Torshamnsgatan 21 SE-164 83 Stockholm Phone: +46 10 719 00 00 www.ericsson.com

Investors Peter Nyquist, Vice President, Head of Investor Relations Phone: +46 10 714 64 99, +46 70 575 29 06 E-mail: [email protected] Lena Häggblom, Director, Investor Relations Phone: +46 10 713 27 78, +46 72 593 27 78 E-mail: [email protected] Stefan Jelvin, Director, Investor Relations Phone: +46 10 714 20 39, +46 70 986 02 27 E-mail: [email protected]

Rikard Tunedal, Director, Investor Relations Phone: +46 10 714 54 00, +46 761 005 400 E-mail: [email protected]

Media Peter Olofsson, Head of Corporate Communication Phone: +46 10 719 18 80 E-mail: [email protected]

Corporate Communications Phone: +46 10 719 69 92 E-mail: [email protected]

http://www.ericsson.com/investors

http://www.ericsson.com/press

mailto:[email protected]




http://www.ericsson.com/







15 Ericsson | Second quarter report 2020 Forward-looking statements

Forward-looking statements

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following: – Our goals, targets, strategies, planning assumptions and

operational or financial performance expectations, such as the investor day key messages and our targets and strategies as described in the introductory bullets, the CEO comments, the Segment descriptions and in Other information

– Industry trends, future characteristics and development of the markets in which we operate

– Our future liquidity, capital resources, capital expenditures, cost savings and profitability

– The expected demand for our existing and new products and services as well as plans to launch new products and services including research and development expenditures

– The ability to deliver on future plans and to realize potential for future growth

– The expected operational or financial performance of strategic cooperation activities and joint ventures

– The time until acquired entities and businesses will be integrated and accretive to income

– Technology and industry trends including the regulatory and standardization environment in which we operate, competition and our customer structure.

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2019.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.

16 Ericsson | Second quarter report 2020 Financial statements and other information

Financial statements and other information

Contents Financial statements ............................................................................................................................................................................................................................... 17 Condensed consolidated income statement ..................................................................................................................................................................................................... 17 Condensed statement of comprehensive income (loss) ............................................................................................................................................................................... 17 Condensed consolidated balance sheet.............................................................................................................................................................................................................. 18 Condensed consolidated statement of cash flows ......................................................................................................................................................................................... 19 Condensed consolidated statement of changes in equity ........................................................................................................................................................................... 20 Condensed consolidated income statement – isolated quarters .............................................................................................................................................................. 20 Condensed consolidated statement of cash flows – isolated quarters .................................................................................................................................................. 21 Condensed Parent Company income statement ............................................................................................................................................................................................. 22 Condensed Parent Company statement of comprehensive income (loss) ............................................................................................................................................ 22 Condensed Parent Company balance sheet ..................................................................................................................................................................................................... 23

Additional information ........................................................................................................................................................................................................................... 24 Accounting policies ..................................................................................................................................................................................................................................................... 24 Net sales by segment by quarter ........................................................................................................................................................................................................................... 25 Sales growth adjusted for comparable units and currency ......................................................................................................................................................................... 26 Gross income and gross margin by segment by quarter .............................................................................................................................................................................. 26 Operating income (loss) and operating margin by segment by quarter ................................................................................................................................................ 27 EBITA and EBITA margin by segment by quarter .......................................................................................................................................................................................... 28 Net sales by market area by quarter .................................................................................................................................................................................................................... 29 Top 5 countries in sales ............................................................................................................................................................................................................................................. 30 Net sales by market area by segment .................................................................................................................................................................................................................. 30 IPR licensing revenues by segment by quarter ................................................................................................................................................................................................ 31 Provisions ........................................................................................................................................................................................................................................................................ 31 Information on investments .................................................................................................................................................................................................................................... 32 Other information ........................................................................................................................................................................................................................................................ 33 Number of employees ................................................................................................................................................................................................................................................ 33

Items excluding restructuring charges .............................................................................................................................................................................................. 34 Restructuring charges by function ........................................................................................................................................................................................................................ 34 Restructuring charges by segment........................................................................................................................................................................................................................ 34 Gross income and gross margin excluding restructuring charges by segment .................................................................................................................................... 35 Operating income (loss) and operating margin excluding restructuring charges by segment ...................................................................................................... 36

Alternative performance measures .................................................................................................................................................................................................... 37 Sales growth adjusted for comparable units and currency ......................................................................................................................................................................... 37 Items excluding restructuring charges ................................................................................................................................................................................................................ 38 EBITA and EBITA margin ........................................................................................................................................................................................................................................ 39 Cash conversion ........................................................................................................................................................................................................................................................... 39 Gross cash and net cash, end of period ............................................................................................................................................................................................................... 40 Capital employed ......................................................................................................................................................................................................................................................... 40 Capital turnover ............................................................................................................................................................................................................................................................ 40 Return on capital employed ..................................................................................................................................................................................................................................... 41 Equity ratio ..................................................................................................................................................................................................................................................................... 41 Return on equity ........................................................................................................................................................................................................................................................... 41 Earnings (loss) per share (non-IFRS) .................................................................................................................................................................................................................. 42 Free cash flow and free cash flow before M&A................................................................................................................................................................................................ 42

17 Ericsson | Second quarter report 2020 Financial statements

Financial statements

Condensed consolidated income statement

1) Based on net income (loss) attributable to owners of the Parent Company. 2) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Condensed statement of comprehensive income (loss)

SEK million 2020 2019 Change 2020 2019 Change

Net sales 55,578 54,810 1% 105,328 103,716 2%

Cost of sales -34,661 -34,739 0% -64,623 -64,866 0%

Gross income 20,917 20,071 4% 40,705 38,850 5%

Gross margin (%) 37.6% 36.6% 38.6% 37.5%

Research and development expenses -10,035 -9,518 5% -19,180 -18,685 3%

Selling and administrative expenses -7,052 -6,964 1% -13,290 -12,995 2%

Impairment losses on trade receivables 42 151 -72% -118 710 -117%

Operating expenses -17,045 -16,331 4% -32,588 -30,970 5%

Other operating income and expenses 131 66 98% 220 839 -74%

Shares in earnings of JV and associated companies -152 -67 127% -180 -84 114%

Operating income 3,851 3,739 3% 8,157 8,635 -6%

Financial income and expenses, net 292 -441 -166% -610 -1,046 -42%

Income after financial items 4,143 3,298 26% 7,547 7,589 -1%

Income tax -1,558 -1,451 7% -2,682 -3,339 -20%

Net income 2,585 1,847 40% 4,865 4,250 14%

Net income attributable to:

Owners of the Parent Company 2,452 1,705 4,608 4,022

Non-controlling interests 133 142 257 228

Other information

Average number of shares, basic (million) 3,322 3,304 3,320 3,302

Earnings (loss) per share, basic (SEK) ¹ 0.74 0.52 1.39 1.22

Earnings (loss) per share, diluted (SEK) ² 0.74 0.51 1.39 1.21

Q2 Jan-Jun

SEK million 2020 2019 2020 2019

Net income (loss) 2,585 1,847 4,865 4,250

Other comprehensive income (loss)

Items that will not be reclassified to profit or loss

Remeasurements of defined benefits pension plans incl. asset ceiling 1,482 -2,624 -3,201 -5,450

Revaluation of borrowings due to change in credit risk -1,032 -108 693 -535

Tax on items that will not be reclassified to profit or loss -146 601 559 1,257

Items that have been or may be reclassified to profit or loss

Cash flow hedge reserve

Gains/losses arising during the period 146 -37 -95 -206

Reclassification adjustments on gains/losses included in profit or loss 71 - 141 -

Changes in cumulative translation adjustments -3,690 188 -1,479 1,595

Share of other comprehensive income on JV and associated companies -90 8 -2 46

Tax on items that have been or may be reclassified to profit or loss -44 7 -9 42

Total other comprehensive income (loss), net of tax -3,303 -1,965 -3,393 -3,251

Total comprehensive income (loss) -718 -118 1,472 999

Total comprehensive income (loss) attributable to:

Owners of the Parent Company -916 -257 1,246 753

Non-controlling interests 198 139 226 246

Q2 Jan-Jun


Condensed consolidated balance sheet

Jun 30 Mar 31 Dec 31

SEK million 2020 2020 2019

Assets

Non-current assets

Intangible assets

Capitalized development expenses 4,078 4,217 4,040

Goodwill 31,130 33,082 31,200

Intellectual property rights, brands and other intangible assets 2,189 2,583 2,491

Property, plant and equipment 13,996 14,244 13,850

Right-of-use assets 8,251 8,589 8,487

Financial assets

Equity in JV and associated companies 1,415 1,618 1,565

Other investments in shares and participations 1,472 1,410 1,432

Customer finance, non-current 1,553 1,843 2,262

Interest-bearing securities, non-current 24,025 23,335 20,354

Other financial assets, non-current 5,944 7,682 5,614

Deferred tax assets 31,082 31,611 31,174

125,135 130,214 122,469

Current assets

Inventories 31,917 32,588 30,863

Contract assets 10,971 10,256 12,171

Trade receivables 38,325 42,572 43,069

Customer finance, current 1,001 1,113 1,494

Other current receivables 18,035 19,383 14,479

Interest-bearing securities, current 5,739 7,834 6,759

Cash and cash equivalents 45,655 48,347 45,079

151,643 162,093 153,914

Total assets 276,778 292,307 276,383

Equity and liabilities

Equity

Stockholders' equity 79,005 79,841 82,559

Non-controlling interest in equity of subsidiaries -533 -728 -681

78,472 79,113 81,878

Non-current liabilities

Post-employment benefits 38,605 43,029 35,817

Provisions, non-current 2,240 2,703 2,679

Deferred tax liabilities 1,164 1,060 1,224

Borrowings, non-current 22,581 23,381 28,257

Lease liabilities, non-current 7,400 7,705 7,595

Other non-current liabilities 1,813 2,178 2,114

73,803 80,056 77,686

Current liabilities

Provisions, current 8,363 8,357 8,244

Borrowings, current 15,290 17,759 9,439

Lease liabilities, current 2,302 2,396 2,287

Contract liabilities 31,532 34,265 29,041

Trade payables 32,182 29,840 30,403

Other current liabilities 34,834 40,521 37,405

124,503 133,138 116,819

Total equity and liabilities 276,778 292,307 276,383

Assets pledged as collateral 6,805 5,866 5,901

Contingent liabilities 1,164 1,446 1,527


Condensed consolidated statement of cash flows

Jan-Dec

SEK million 2020 2019 2020 2019 2019

Operating activities

Net income 2,585 1,847 4,865 4,250 1,840

Adjustments to reconcile net income to cash

Taxes 1,132 310 712 1,114 1,652

Earnings/dividends in JV and associated companies 155 71 185 95 406

Depreciation, amortization and impairment losses 2,156 2,274 4,276 4,600 9,089

Other -440 450 294 374 1,079

5,588 4,952 10,332 10,433 14,066

Changes in operating net assets

Inventories -1,253 -3,065 -1,791 -6,016 261

Customer finance, current and non-current 307 384 1,124 -527 -858

Trade receivables and contract assets 0 3,338 5,559 7,683 10,995

Trade payables 4,104 1,833 1,928 1,853 -372

Provisions and post-employment benefits -1,189 -480 -971 -3,939 -3,729

Contract liabilities -1,000 -1,641 2,987 6,822 -1,579

Other operating assets and liabilities, net -1,108 -1,698 -9,417 -6,921 -1,911

-139 -1,329 -581 -1,045 2,807

Cash flow from operating activities 5,449 3,623 9,751 9,388 16,873

Investing activities

Investments in property, plant and equipment -1,327 -1,098 -2,440 -2,412 -5,118

Sales of property, plant and equipment 69 184 95 416 744

Acquisitions/divestments of subsidiaries and other operations, net -45 3 -253 302 -1,505

Product development -211 -446 -473 -903 -1,545

Other investing activities -126 -36 -168 -201 -331

Interest-bearing securities 1,141 2,414 -2,291 7,087 4,214

Cash flow from investing activities -499 1,021 -5,530 4,289 -3,541

Cash flow before financing activities 4,950 4,644 4,221 13,677 13,332

Financing activities

Dividends paid -2,489 -3,308 -2,498 -4,294 -4,450

Repayment of lease liabilities -618 -623 -1,214 -1,227 -2,990

Other financing activities -1,451 -680 585 -1,690 540

Cash flow from financing activities -4,558 -4,611 -3,127 -7,211 -6,900

Effect of exchange rate changes on cash -3,084 13 -518 644 258

Net change in cash and cash equivalents -2,692 46 576 7,110 6,690

Cash and cash equivalents, beginning of period 48,347 45,453 45,079 38,389 38,389

Cash and cash equivalents, end of period 45,655 45,499 45,655 45,499 45,079

Q2 Jan-Jun


Condensed consolidated statement of changes in equity

1) Opening balance adjustment in 2019 due to IFRS 16. 2) SEK 0.75 per share of the dividend decided by the AGM in April will be paid out in Q3 2020.

Condensed consolidated income statement – isolated quarters

1) Includes cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019 and a partial release of the same provision of SEK 0.7 b. in Q4 2019. 2) Based on net income (loss) attributable to owners of the Parent Company. 3) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

Jan-Dec

SEK million 2020 2019 2019

Opening balance 81,878 87,770 87,770

Adjustment due to new accounting standards ¹⁾ - -249 -249

Adjusted opening balance 81,878 87,521 87,521

Total comprehensive income (loss) 1,472 999 -1,750

Sale/repurchase of own shares 81 86 197

Long-term variable compensation plans 97 221 377

Dividends to shareholders ²⁾ -5,056 -4,294 -4,450

Transactions with non-controlling interests - - -17

Closing balance 78,472 84,533 81,878

Jan-Jun

Isolated quarters, SEK million Q2 Q1 Q4 Q3 Q2 Q1

Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Cost of sales -34,661 -29,962 -41,939 -35,587 -34,739 -30,127

Gross income 20,917 19,788 24,434 21,540 20,071 18,779

Gross margin (%) 37.6% 39.8% 36.8% 37.7% 36.6% 38.4%

Research and development expenses -10,035 -9,145 -10,633 -9,497 -9,518 -9,167

Selling and administrative expenses -7,052 -6,238 -8,222 -4,920 -6,964 -6,031

Impairment losses on trade receivables 42 -160 -173 200 151 559

Operating expenses -17,045 -15,543 -19,028 -14,217 -16,331 -14,639

Other operating income and expenses ¹⁾ 131 89 756 -11,305 66 773

Shares in earnings of JV and associated companies -152 -28 -37 -214 -67 -17

Operating income (loss) 3,851 4,306 6,125 -4,196 3,739 4,896

Financial income and expenses, net 292 -902 -71 -685 -441 -605

Income after financial items 4,143 3,404 6,054 -4,881 3,298 4,291

Taxes -1,558 -1,124 -1,570 -2,013 -1,451 -1,888

Net income (loss) 2,585 2,280 4,484 -6,894 1,847 2,403

Net income (loss) attributable to:

Owners of the Parent Company 2,452 2,156 4,430 -6,229 1,705 2,317

Non-controlling interests 133 124 54 -665 142 86

Other information

Average number of shares, basic (million) 3,322 3,317 3,313 3,308 3,304 3,300

Earnings (loss) per share, basic (SEK) ²⁾ 0.74 0.65 1.34 -1.89 0.52 0.70

Earnings (loss) per share, diluted (SEK) ³⁾ 0.74 0.65 1.33 -1.89 0.51 0.70

2020 2019


Condensed consolidated statement of cash flows – isolated quarters


Operating activities

Net income (loss) 2,585 2,280 4,484 -6,894 1,847 2,403

Adjustments to reconcile net income to cash

Taxes 1,132 -420 949 -411 310 804

Earnings/dividends in JV and associated companies 155 30 33 278 71 24

Depreciation, amortization and impairment losses 2,156 2,120 2,290 2,199 2,274 2,326

Other -440 734 197 508 450 -76

5,588 4,744 7,953 -4,320 4,952 5,481

Changes in operating net assets

Inventories -1,253 -538 5,200 1,077 -3,065 -2,951

Customer finance, current and non-current 307 817 -66 -265 384 -911

Trade receivables and contract assets 0 5,559 -3,216 6,528 3,338 4,345

Trade payables 4,104 -2,176 688 -2,913 1,833 20

Provisions and post-employment benefits -1,189 218 -10,509 10,719 -480 -3,459

Contract liabilities -1,000 3,987 -4,413 -3,988 -1,641 8,463

Other operating assets and liabilities, net -1,108 -8,309 4,859 151 -1,698 -5,223

-139 -442 -7,457 11,309 -1,329 284

Cash flow from operating activities 5,449 4,302 496 6,989 3,623 5,765

Investing activities

Investments in property, plant and equipment -1,327 -1,113 -1,475 -1,231 -1,098 -1,314

Sales of property, plant and equipment 69 26 206 122 184 232

Acquisitions/divestments of subsidiaries and other operations, net -45 -208 -1,341 -466 3 299

Product development -211 -262 -329 -313 -446 -457

Other investing activities -126 -42 -74 -56 -36 -165

Interest-bearing securities 1,141 -3,432 -1,759 -1,114 2,414 4,673

Cash flow from investing activities -499 -5,031 -4,772 -3,058 1,021 3,268

Cash flow before financing activities 4,950 -729 -4,276 3,931 4,644 9,033

Financing activities

Dividends paid -2,489 -9 -15 -141 -3,308 -986

Repayment of lease liabilities -618 -596 -711 -1,052 -623 -604

Other financing activities -1,451 2,036 834 1,396 -680 -1,010

Cash flow from financing activities -4,558 1,431 108 203 -4,611 -2,600

Effect of exchange rate changes on cash -3,084 2,566 -1,936 1,550 13 631

Net change in cash and cash equivalents -2,692 3,268 -6,104 5,684 46 7,064

Cash and cash equivalents, beginning of period 48,347 45,079 51,183 45,499 45,453 38,389

Cash and cash equivalents, end of period 45,655 48,347 45,079 51,183 45,499 45,453

2020 2019


Condensed Parent Company income statement

1) Includes costs of SEK -10.7 billion in Jan-Dec 2019 related to the resolution of the SEC and DOJ investigations.

Condensed Parent Company statement of comprehensive income (loss)

Jan-Dec

SEK million 2020 2019 2020 2019 2019

Net sales - - - - -

Cost of sales - - - - -

Gross income - - - - -

Operating expenses -241 -236 -492 -757 -1,531

Other operating income and expenses ¹⁾ 354 518 934 969 -8,148

Operating income 113 282 442 212 -9,679

Financial net 1,140 649 1,833 596 6,610

Income after financial items 1,253 931 2,275 808 -3,069

Transfers to (-) / from untaxed reserves - - - - -1,961

Taxes -144 -45 -318 -76 87

Net income (loss) 1,109 886 1,957 732 -4,943

Q2 Jan-Jun

Jan-Dec

SEK million 2020 2019 2020 2019 2019

Net income (loss) 1,109 886 1,957 732 -4,943

Revaluation of borrowings due to change in credit risk -1,032 -108 693 -535 -651

Tax on items that will not be reclassified to profit or loss 212 22 -143 110 134

Total other comprehensive income, net of tax -820 -86 550 -425 -517

Total comprehensive income (loss) 289 800 2,507 307 -5,460

Q2 Jan-Jun


Condensed Parent Company balance sheet

Jun 30 Dec 31

SEK million 2020 2019

Assets

Fixed assets

Intangible assets 41 58

Tangible assets 369 303

Financial assets ¹⁾ 111,319 106,156

111,729 106,517

Current assets

Inventories - -

Receivables 25,863 23,166

Short-term investments 5,508 6,328

Cash and cash equivalents 33,813 29,800

65,184 59,294

Total assets 176,913 165,811

Stockholders' equity, provisions and liabilities

Equity

Restricted equity 48,164 48,164

Non-restricted equity 29,861 32,222

78,025 80,386

Provisions 630 668

Non-current liabilities 22,803 28,341

Current liabilities 75,455 56,416

Total stockholders' equity, provisions and liabilities 176,913 165,811

¹⁾ Of which interest-bearing securities, non-current 24,025 20,354

24 Ericsson | Second quarter report 2020 Additional information

Additional information

Accounting policies

The group This interim report is prepared in accordance with IAS 34 “Interim Financial Reporting”. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2019 and should be read in conjunction with that annual report. There are no amendments of IFRS during 2020 that are estimated to have a material impact on the result and financial position of the Company.

Covid-19 impacts on the Financial statements As noted in our Q1 report, the Covid-19 pandemic has impacted certain lines within our financial statements. Fiscal stimulus provided by governments worldwide has reduced government bond yields and resulted in the significant movement in the capital and equity markets in Q1, although most of these trends have partially reversed in Q2. This meant that movements in certain line items reported in Q1 have largely been offset or reversed in Q2. Figures below are year to date.

In Sweden, the decrease in government bond yields in Q1 was partially reversed in Q2. With additional cash contribution of SEK 1.0 b. and improvement in investment returns in Q2, net pensions liability in Sweden increased by SEK 2.1 b.

Borrowings issued by the Parent Company are held at fair value with changes in value due to changes in credit risk recognized in Other comprehensive income (OCI). The widening of credit spreads for corporate bonds seen in Q1 was partially reversed in Q2, resulting in a positive impact of SEK 0.7 b. recognized in the OCI.

Foreign exchanges rates continued to fluctuate significantly during the period with USD weakening against SEK in Q2, reversing the trend in Q1. This resulted in a net gain on the hedge loan balances used to manage FX execution risk of SEK 0.1 b. recognized within Financial income and expenses in the Consolidated income statement. In general, a weaker SEK in Q1 was strengthened in Q2, resulting in a negative currency translation adjustment of SEK -1.5 b. on consolidation, recognized in the OCI.

The Company currently expect no material changes to expected future cash flows which could impact recoverability of assets such as deferred tax assets and intangible assets. Risk assessment on the business plans is carried out on a regular basis and an impairment review will be performed if conditions suggest that such assets may be impaired.

The Company also assessed the wider economic impact in the foreseeable future on the expected credit losses model for trade receivables. The Company concluded that the impact is not material but will continue to perform such analysis on a regular basis.


Net sales by segment by quarter


Networks 39,827 35,126 44,448 39,261 37,819 33,481

Of which Products 28,966 24,748 31,159 27,500 26,698 23,765

Of which Services 10,861 10,378 13,289 11,761 11,121 9,716

Digital Services 8,575 7,345 13,168 9,881 8,991 7,817



Managed Services 5,573 5,714 7,027 6,359 6,323 5,856

Emerging Business and Other 1,603 1,565 1,730 1,626 1,677 1,752

Total 55,578 49,750 66,373 57,127 54,810 48,906

Sequential change, percent Q2 Q1 Q4 Q3 Q2 Q1

Networks 13% -21% 13% 4% 13% -20%

Of which Products 17% -21% 13% 3% 12% -20%

Of which Services 5% -22% 13% 6% 14% -18%

Digital Services 17% -44% 33% 10% 15% -40%

Of which Products 21% -48% 31% 21% 17% -47%

Of which Services 12% -39% 36% -2% 13% -30%

Managed Services -2% -19% 11% 1% 8% -15%

Emerging Business and Other 2% -10% 6% -3% -4% -23%

Total 12% -25% 16% 4% 12% -23%

Year over year change, percent Q2 Q1 Q4 Q3 Q2 Q1

Networks 5% 5% 7% 9% 17% 17%

Of which Products 8% 4% 5% 9% 20% 22%

Of which Services -2% 7% 12% 11% 10% 6%

Digital Services -5% -6% 1% 10% 2% 8%

Of which Products 0% -4% -2% 22% 3% 0%

Of which Services -9% -9% 5% -3% 0% 17%

Managed Services -12% -2% 2% -2% -3% -1%

Emerging Business and Other -4% -11% -24% -33% -18% 6%

Total 1% 2% 4% 6% 10% 13%

Year to date, SEK million Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Networks 74,953 35,126 155,009 110,561 71,300 33,481







Emerging Business and Other 3,168 1,565 6,785 5,055 3,429 1,752

Total 105,328 49,750 227,216 160,843 103,716 48,906

Year over year change, percent Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Networks 5% 5% 12% 14% 17% 17%

Of which Products 6% 4% 13% 16% 21% 22%

Of which Services 2% 7% 10% 9% 9% 6%

Digital Services -5% -6% 5% 6% 4% 8%

Of which Products -2% -4% 5% 9% 2% 0%

Of which Services -9% -9% 4% 4% 8% 17%

Managed Services -7% -2% -1% -2% -2% -1%

Emerging Business and Other -8% -11% -19% -18% -7% 6%

Total 2% 2% 8% 9% 11% 13%

2020 2019

2020 2019

2020 2019

2020 2019

2020 2019


Sales growth adjusted for comparable units and currency

1) Adjusted for Kathrein acquisition made in October 2019. 2) Adjusted for MediaKind divestment in February 2019.

Gross income and gross margin by segment by quarter

Isolated quarter, year over year change, percent Q2 Q1 Q4 Q3 Q2 Q1

Networks ¹⁾ 4% 0% 2% 4% 11% 10%

Digital Services -5% -9% -3% 5% -3% 0%


Emerging Business and Other ²⁾ -6% -8% 9% -7% 24% 38%

Total ¹⁾ ²⁾ 0% -2% 1% 3% 7% 7%

2020 2019

Year to date, year over year change, percent Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Networks 2% 0% 6% 8% 11% 10%

Digital Services -7% -9% -1% 1% -2% 0%


Emerging Business and Other ¹⁾ -7% -8% 14% 15% 30% 38%

Total ¹⁾ ²⁾ -1% -2% 4% 5% 7% 7%

2020 2019


Networks 16,022 15,586 18,265 16,327 15,670 14,455


Managed Services 955 933 1,039 1,136 779 1,036

Emerging Business and Other 202 340 232 328 311 410

Total 20,917 19,788 24,434 21,540 20,071 18,779

2020 2019

Isolated quarters, as percentage of net sales Q2 Q1 Q4 Q3 Q2 Q1

Networks 40.2% 44.4% 41.1% 41.6% 41.4% 43.2%

Digital Services 43.6% 39.9% 37.2% 37.9% 36.8% 36.8%

Managed Services 17.1% 16.3% 14.8% 17.9% 12.3% 17.7%

Emerging Business and Other 12.6% 21.7% 13.4% 20.2% 18.5% 23.4%

Total 37.6% 39.8% 36.8% 37.7% 36.6% 38.4%

2020 2019


Networks 31,608 15,586 64,717 46,452 30,125 14,455


Managed Services 1,888 933 3,990 2,951 1,815 1,036

Emerging Business and Other 542 340 1,281 1,049 721 410

Total 40,705 19,788 84,824 60,390 38,850 18,779

2020 2019

Year to date, as percentage of net sales Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Networks 42.2% 44.4% 41.8% 42.0% 42.3% 43.2%




Total 38.6% 39.8% 37.3% 37.5% 37.5% 38.4%

2020 2019


Operating income (loss) and operating margin by segment by quarter


Networks 5,255 5,827 6,399 7,216 5,680 5,472

Digital Services -697 -1,417 -164 -660 -1,405 -1,798

Managed Services 263 408 292 562 203 1,252

Emerging Business and Other -970 -512 -402 -11,314 -739 -30

Total 3,851 4,306 6,125 -4,196 3,739 4,896

2020 2019


Networks 13.2% 16.6% 14.4% 18.4% 15.0% 16.3%

Digital Services -8.1% -19.3% -1.2% -6.7% -15.6% -23.0%


Emerging Business and Other -60.5% -32.7% -23.2% -695.8% -44.1% -1.7%

Total 6.9% 8.7% 9.2% -7.3% 6.8% 10.0%

2020 2019


Networks 11,082 5,827 24,767 18,368 11,152 5,472

Digital Services -2,114 -1,417 -4,027 -3,863 -3,203 -1,798

Managed Services 671 408 2,309 2,017 1,455 1,252

Emerging Business and Other -1,482 -512 -12,485 -12,083 -769 -30

Total 8,157 4,306 10,564 4,439 8,635 4,896

2020 2019


Networks 14.8% 16.6% 16.0% 16.6% 15.6% 16.3%




Total 7.7% 8.7% 4.6% 2.8% 8.3% 10.0%

2020 2019


EBITA and EBITA margin by segment by quarter


Networks 5,321 5,957 6,447 7,253 5,716 5,552

Digital Services -563 -1,283 -23 -521 -1,268 -1,638


Emerging Business and Other -913 -456 -323 -11,262 -688 43

Total 4,109 4,627 6,394 -3,967 3,965 5,210

2020 2019


Networks 13.4% 17.0% 14.5% 18.5% 15.1% 16.6%



Emerging Business and Other -57.0% -29.1% -18.7% -692.6% -41.0% 2.5%

Total 7.4% 9.3% 9.6% -6.9% 7.2% 10.7%

2020 2019


Networks 11,278 5,957 24,968 18,521 11,268 5,552



Emerging Business and Other -1,369 -456 -12,230 -11,907 -645 43

Total 8,736 4,627 11,602 5,208 9,175 5,210

2020 2019


Networks 15.0% 17.0% 16.1% 16.8% 15.8% 16.6%



Emerging Business and Other -43.2% -29.1% -180.3% -235.5% -18.8% 2.5%

Total 8.3% 9.3% 5.1% 3.2% 8.8% 10.7%

2020 2019


Net sales by market area by quarter

*) No sales to UK are included as from 2020.


South East Asia, Oceania and India 6,582 5,917 9,231 7,432 6,965 6,148

North East Asia 7,790 3,907 9,704 6,356 6,516 3,824

North America 18,407 17,911 17,368 18,985 17,699 16,171

Europe and Latin America ¹⁾ ²⁾ 13,061 12,241 17,489 14,308 14,085 13,124

Middle East and Africa 5,431 5,829 8,426 6,046 5,641 5,412

Other ¹⁾ ²⁾ 4,307 3,945 4,155 4,000 3,904 4,227

Total 55,578 49,750 66,373 57,127 54,810 48,906

¹⁾ Of which in Sweden 284 227 235 13 149 192

²⁾ Of which in EU* 7,278 6,259 10,572 8,815 8,385 7,957

2020 2019

Sequential change, percent Q2 Q1 Q4 Q3 Q2 Q1

South East Asia, Oceania and India 11% -36% 24% 7% 13% -25%

North East Asia 99% -60% 53% -2% 70% -54%

North America 3% 3% -9% 7% 9% -10%

Europe and Latin America ¹⁾ ²⁾ 7% -30% 22% 2% 7% -27%

Middle East and Africa -7% -31% 39% 7% 4% -21%

Other ¹⁾ ²⁾ 9% -5% 4% 2% -8% -5%

Total 12% -25% 16% 4% 12% -23%

¹⁾ Of which in Sweden 25% -3% 1708% -91% -22% -49%

²⁾ Of which in EU* 16% -29% 20% 5% 5% -23%

2020 2019

Year over year change, percent Q2 Q1 Q4 Q3 Q2 Q1

South East Asia, Oceania and India -5% -4% 12% -7% 0% -4%

North East Asia 20% 2% 16% 10% 37% 13%

North America 4% 11% -4% 27% 23% 43%

Europe and Latin America ¹⁾ ²⁾ -7% -7% -2% -3% 1% 1%

Middle East and Africa -4% 8% 23% 4% -3% -8%

Other ¹⁾ ²⁾ 10% -7% -6% -13% -1% 21%

Total 1% 2% 4% 6% 10% 13%

¹⁾ Of which in Sweden 91% 18% -37% -97% -75% -79%

²⁾ Of which in EU* 5% -4% 2% 4% -3% -7%

2020 2019



North East Asia 11,697 3,907 26,400 16,696 10,340 3,824

North America 36,318 17,911 70,223 52,855 33,870 16,171

Europe and Latin America ¹⁾ ²⁾ 25,302 12,241 59,006 41,517 27,209 13,124


Other ¹⁾ ²⁾ 8,252 3,945 16,286 12,131 8,131 4,227

Total 105,328 49,750 227,216 160,843 103,716 48,906

¹⁾ Of which in Sweden 511 227 589 354 341 192

²⁾ Of which in EU* 13,537 6,259 35,729 25,157 16,342 7,957

2020 2019

Year to date, year over year change, percent Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

South East Asia, Oceania and India -5% -4% 1% -4% -2% -4%

North East Asia 13% 2% 18% 20% 27% 13%

North America 7% 11% 20% 30% 32% 43%

Europe and Latin America ¹⁾ ²⁾ -7% -7% -1% 0% 1% 1%

Middle East and Africa 2% 8% 5% -2% -5% -8%

Other ¹⁾ ²⁾ 1% -7% -1% 1% 9% 21%

Total 2% 2% 8% 9% 11% 13%

¹⁾ Of which in Sweden 50% 18% -75% -82% -77% -79%

²⁾ Of which in EU* 1% -4% -1% -2% -5% -7%

2020 2019


Top 5 countries in sales

Net sales by market area by segment

Country, percentage of net sales 2020 2019 2020 2019

United States 35% 33% 36% 34%

China 9% 7% 7% 6%

Japan 3% 3% 4% 3%

Australia 4% 3% 4% 3%

Saudi Arabia 3% 2% 4% 3%

Q2 Jan-Jun

SEK milion NetworksDigital

ServicesManaged

Services

Emerging Business

and Other Total NetworksDigital

ServicesManaged

Services

Emerging Business

and Other TotalSouth East Asia, Oceania and India 4,468 1,078 1,028 8 6,582 8,677 1,850 1,947 25 12,499

North East Asia 6,381 1,180 172 57 7,790 9,162 2,037 375 123 11,697

North America 15,772 1,733 879 23 18,407 31,002 3,280 2,001 35 36,318

Europe and Latin America 7,813 2,633 2,526 89 13,061 15,018 5,017 5,092 175 25,302

Middle East and Africa 3,009 1,450 969 3 5,431 6,585 2,793 1,872 10 11,260

Other 2,384 501 -1 1,423 4,307 4,509 943 0 2,800 8,252

Total 39,827 8,575 5,573 1,603 55,578 74,953 15,920 11,287 3,168 105,328

Share of total 72% 15% 10% 3% 100% 71% 15% 11% 3% 100%

Q2 2020 Jan-Jun 2020

Sequential change, percent NetworksDigital

ServicesManaged

Services

Emerging Business

and Other TotalSouth East Asia, Oceania and India 6% 40% 12% -53% 11%

North East Asia 129% 38% -15% -14% 99%

North America 4% 12% -22% 92% 3%

Europe and Latin America 8% 10% -2% 3% 7%

Middle East and Africa -16% 8% 7% -57% -7%

Other 12% 13% -200% 3% 9%

Total 13% 17% -2% 2% 12%

Q2 2020

Year over year change, percent NetworksDigital

ServicesManaged

Services

Emerging Business

and Other Total NetworksDigital

ServicesManaged

Services

Emerging Business

and Other TotalSouth East Asia, Oceania and India -11% 17% -1% -47% -5% -9% 7% 7% -7% -5%

North East Asia 19% 28% -16% 90% 20% 12% 25% -20% 76% 13%

North America 11% -22% -27% -28% 4% 13% -19% -12% -35% 7%

Europe and Latin America -4% -10% -14% -2% -7% -4% -9% -12% -5% -7%

Middle East and Africa -3% -8% 1% 200% -4% 6% -8% 3% 233% 2%

Other 20% 24% -200% -6% 10% 8% 10% -100% -9% 1%

Total 5% -5% -12% -4% 1% 5% -5% -7% -8% 2%

Q2 2020 Jan-Jun 2020


IPR licensing revenues by segment by quarter

Provisions

1) Includes additions of cost provisions related to the resolution of the SEC and DOJ investigations of SEK -11.5 b. in Q3 2019. Includes payment of SEK 10.1 b. to SEC and DOJ in Q4 2019.


Networks 2,282 2,019 2,014 1,972 1,845 2,066

Digital Services 501 443 443 433 404 454

Total 2,783 2,462 2,457 2,405 2,249 2,520

2020 2019


Networks 4,301 2,019 7,897 5,883 3,911 2,066

Digital Services 944 443 1,734 1,291 858 454

Total 5,245 2,462 9,631 7,174 4,769 2,520

2020 2019


Opening balance 11,060 10,923 22,007 11,358 12,033 16,008

Additions ¹⁾ 2,116 793 2,438 12,774 1,423 1,401

Utilization/Cash out ¹⁾ -2,066 -673 -12,529 -2,151 -2,084 -1,676

Of which restructuring -137 -186 -143 -711 -378 -557

Reversal of excess amounts -192 -124 -842 -128 -88 -125

Reclassification, translation difference and other -315 141 -151 154 74 -3,575

Closing balance 10,603 11,060 10,923 22,007 11,358 12,033

Of which restructuring 1,594 1,202 1,095 1,099 1,743 2,059

2020 2019


Opening balance 10,923 10,923 16,008 16,008 16,008 16,008

Additions 2,909 793 7,172 15,598 2,824 1,401

Utilization/Cash out -2,739 -673 -7,576 -5,911 -3,760 -1,676

Of which restructuring -323 -186 -1,789 -1,646 -935 -557

Reversal of excess amounts -316 -124 -1,183 -341 -213 -125

Reclassification, translation difference and other -174 141 -3,498 -3,347 -3,501 -3,575

Closing balance 10,603 11,060 10,923 22,007 11,358 12,033

Of which restructuring 1,594 1,202 1,095 1,099 1,743 2,059

2020 2019


Information on investments Investments in assets subject to depreciation, amortization, impairment and write-downs


Additions

Property, plant and equipment 1,327 1,113 1,475 1,231 1,098 1,314

Capitalized development expenses 211 262 329 313 446 457

IPR, brands and other intangible assets 97 1 1 2 - 1

Total 1,635 1,376 1,805 1,546 1,544 1,772

Depreciation, amortization and impairment losses

Property, plant and equipment 1,003 1,009 1,100 1,048 919 880

Capitalized development expenses 272 174 256 330 449 520

Goodwill, IPR, brands and other intangible assets 258 321 269 229 226 314

Total 1,533 1,504 1,625 1,607 1,594 1,714

2020 2019


Additions

Property, plant and equipment 2,440 1,113 5,118 3,643 2,412 1,314

Capitalized development expenses 473 262 1,545 1,216 903 457

IPR, brands and other intangible assets 98 1 4 3 1 1

Total 3,011 1,376 6,667 4,862 3,316 1,772

Depreciation, amortization and impairment losses

Property, plant and equipment 2,012 1,009 3,947 2,847 1,799 880

Capitalized development expenses 446 174 1,555 1,299 969 520

Goodwill, IPR, brands and other intangible assets 579 321 1,038 769 540 314

Total 3,037 1,504 6,540 4,915 3,308 1,714

2020 2019


Other information

1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share. 2) Based on net income (loss) attributable to owners of the Parent Company. 3) Excluding amortizations and write-downs of acquired intangibles and restructuring charges.

Number of employees

Jan-Dec

SEK million 2020 2019 2020 2019 2019

Number of shares and earnings per share

Number of shares, end of period (million) 3,334 3,334 3,334 3,334 3,334

Of which class A-shares (million) 262 262 262 262 262

Of which class B-shares (million) 3,072 3,072 3,072 3,072 3,072

Number of treasury shares, end of period (million) 11 29 11 29 20

Number of shares outstanding, basic, end of period (million) 3,324 3,305 3,324 3,305 3,314

Numbers of shares outstanding, diluted, end of period (million) 3,330 3,327 3,330 3,327 3,328

Average number of treasury shares (million) 12 30 15 32 28

Average number of shares outstanding, basic (million) 3,322 3,304 3,320 3,302 3,306

Average number of shares outstanding, diluted (million) ¹⁾ 3,329 3,325 3,326 3,324 3,320

Earnings (loss) per share, basic (SEK) ²⁾ 0.74 0.52 1.39 1.22 0.67

Earnings (loss) per share, diluted (SEK) ¹⁾ 0.74 0.51 1.39 1.21 0.67

Earnings (loss) per share (non-IFRS), diluted (SEK) ³⁾ 0.94 0.59 1.74 1.39 1.07

Ratios

Days sales outstanding - - 80 95 75

Inventory turnover days 85 91 89 92 77

Payable days 82 82 88 86 77

Alternative Performance Measures (APMs)

Equity ratio (%) - - 28.4% 30.1% 29.6%

Return on equity (%) 12.3% 8.1% 11.4% 9.4% 2.6%

Return on capital employed (%) 9.1% 9.2% 9.9% 11.0% 6.7%

Capital turnover (times) 1.3 1.4 1.3 1.3 1.4

Free cash flow 3,191 1,607 5,298 5,363 6,128

Free cash flow before M&A 3,236 1,604 5,551 5,061 7,633

Exchange rates used in the consolidation

SEK/EUR - closing rate - - 10.50 10.55 10.43

SEK/USD - closing rate - - 9.37 9.27 9.32

Other

Market area inventory, end of period 18,183 21,205 18,183 21,205 17,530

Export sales from Sweden 30,178 28,356 57,580 50,842 120,822

Q2 Jan-Jun

End of period Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31


North East Asia 13,965 13,786 13,783 13,608 13,334 13,169

North America 9,785 9,718 9,643 9,487 9,342 9,246

Europe and Latin America ¹⁾ 46,521 46,402 47,135 44,150 43,846 43,833


Total 99,800 99,095 99,417 95,887 94,756 94,580

¹⁾ Of which Sweden 12,884 12,746 12,730 12,679 12,549 12,455

2020 2019

34 Ericsson | Second quarter report 2020 Items excluding restructuring charges

Items excluding restructuring charges

Restructuring charges by function

Restructuring charges by segment


Cost of sales -312 -335 -218 -28 -26 -65

Research and development expenses -227 39 -79 -98 -49 -118

Selling and administrative expenses -144 -5 -30 -21 -43 -23

Total -683 -301 -327 -147 -118 -206

2020 2019


Cost of sales -647 -335 -337 -119 -91 -65

Research and development expenses -188 39 -344 -265 -167 -118

Selling and administrative expenses -149 -5 -117 -87 -66 -23

Total -984 -301 -798 -471 -324 -206

2020 2019


Networks -380 -75 -48 -5 -5 -10

of which cost of sales -110 -72 -24 12 9 -3

of which operating expenses -270 -3 -24 -17 -14 -7

Digital Services 34 20 -206 -128 -93 -187

of which cost of sales 3 -16 -125 -32 -27 -60

of which operating expenses 31 36 -81 -96 -66 -127

Managed Services -2 -245 -42 -2 1 -2

of which cost of sales -2 -245 -40 -2 3 -1

of which operating expenses 0 0 -2 0 -2 -1

Emerging Business and Other -335 -1 -31 -12 -21 -7

of which cost of sales -203 -2 -29 -6 -11 -1

of which operating expenses -132 1 -2 -6 -10 -6

Total -683 -301 -327 -147 -118 -206

2020 2019


Networks -455 -75 -68 -20 -15 -10


of which operating expenses -273 -3 -62 -38 -21 -7

Digital Services 54 20 -614 -408 -280 -187



Managed Services -247 -245 -45 -3 -1 -2



Emerging Business and Other -336 -1 -71 -40 -28 -7


of which operating expenses -131 1 -24 -22 -16 -6

Total -984 -301 -798 -471 -324 -206

2020 2019


Gross income and gross margin excluding restructuring charges by segment


Networks 16,132 15,658 18,289 16,315 15,661 14,458


Managed Services 957 1,178 1,079 1,138 776 1,037

Emerging Business and Other 405 342 261 334 322 411

Total 21,229 20,123 24,652 21,568 20,097 18,844

2020 2019


Networks 40.5% 44.6% 41.1% 41.6% 41.4% 43.2%




Total 38.2% 40.4% 37.1% 37.8% 36.7% 38.5%

2020 2019


Networks 31,790 15,658 64,723 46,434 30,119 14,458



Emerging Business and Other 747 342 1,328 1,067 733 411

Total 41,352 20,123 85,161 60,509 38,941 18,844

2020 2019


Networks 42.4% 44.6% 41.8% 42.0% 42.2% 43.2%




Total 39.3% 40.4% 37.5% 37.6% 37.5% 38.5%

2020 2019


Operating income (loss) and operating margin excluding restructuring charges by segment


Networks 5,635 5,902 6,447 7,221 5,685 5,482

Digital Services -731 -1,437 42 -532 -1,312 -1,611


Emerging Business and Other -635 -511 -371 -11,302 -718 -23

Total 4,534 4,607 6,452 -4,049 3,857 5,102

2020 2019


Networks 14.1% 16.8% 14.5% 18.4% 15.0% 16.4%

Digital Services -8.5% -19.6% 0.3% -5.4% -14.6% -20.6%



Total 8.2% 9.3% 9.7% -7.1% 7.0% 10.4%

2020 2019


Networks 11,537 5,902 24,835 18,388 11,167 5,482



Emerging Business and Other -1,146 -511 -12,414 -12,043 -741 -23

Total 9,141 4,607 11,362 4,910 8,959 5,102

2020 2019


Networks 15.4% 16.8% 16.0% 16.6% 15.7% 16.4%




Total 8.7% 9.3% 5.0% 3.1% 8.6% 10.4%

2020 2019

37 Ericsson | Second quarter report 2020 Alternative performance measures

Alternative performance measures

This section includes a reconciliation of certain Alternative Performance Measures (APMs) to the most directly reconcilable line items in the financial statements. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.

APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.

Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation.

The APMs presented in this report may differ from similarly titled measures used by other companies.

For additional information, see Alternative Performance Measures in the Ericsson Annual Report 2019.

Sales growth adjusted for comparable units and currency Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations.

1) Adjusted for divestment of MediaKind in February 2019 and acquisition of Kathrein in October 2019.

Isolated quarters, year over year change Q2 Q1 Q4 Q3 Q2 Q1

Reported net sales 55,578 49,750 66,373 57,127 54,810 48,906

Acquired business -422 -319 -96 - - -

Net FX impact -326 -1,654 -2,748 -2,457 -2,538 -2,932

Comparable net sales, excluding FX impact 54,830 47,777 63,529 54,670 52,272 45,974

Comparable quarter net sales adj. for acq/div business ¹⁾ 54,810 48,798 63,037 53,077 49,055 42,961

Sales growth adjusted for comparable units and currency (%) 0% -2% 1% 3% 7% 7%

2020 2019

Year to date, year over year change Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Reported net sales 105,328 49,750 227,216 160,843 103,716 48,906

Acquired business -741 -319 -96 - - -

Net FX impact -1,980 -1,654 -10,675 -7,927 -5,470 -2,932

Comparable net sales, excluding FX impact 102,607 47,777 216,445 152,916 98,246 45,974

Comparable quarter net sales adj. for acq/div business ¹⁾ 103,608 48,798 208,130 145,093 92,016 42,961

Sales growth adjusted for comparable units and currency (%) -1% -2% 4% 5% 7% 7%

2020 2019


Items excluding restructuring charges Gross income, operating expenses, and operating income (loss) are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.


Gross income 20,917 19,788 24,434 21,540 20,071 18,779

Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Gross margin (%) 37.6% 39.8% 36.8% 37.7% 36.6% 38.4%

Gross income 20,917 19,788 24,434 21,540 20,071 18,779

Restructuring charges included in cost of sales 312 335 218 28 26 65

Gross income excluding restructuring charges 21,229 20,123 24,652 21,568 20,097 18,844

Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Gross margin excluding restructuring charges (%) 38.2% 40.4% 37.1% 37.8% 36.7% 38.5%


Restructuring charges included in R&D expenses 227 -39 79 98 49 118

Restructuring charges included in selling and administrative expenses 144 5 30 21 43 23

Operating expenses excluding restructuring charges -16,674 -15,577 -18,919 -14,098 -16,239 -14,498


Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Operating margin (%) 6.9% 8.7% 9.2% -7.3% 6.8% 10.0%


Total restructuring charges 683 301 327 147 118 206

Operating income (loss) excluding restructuring charges 4,534 4,607 6,452 -4,049 3,857 5,102

Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Operating margin excluding restructuring charges (%) 8.2% 9.3% 9.7% -7.1% 7.0% 10.4%

2020 2019


Gross income 40,705 19,788 84,824 60,390 38,850 18,779

Net sales 105,328 49,750 227,216 160,843 103,716 48,906

Gross margin (%) 38.6% 39.8% 37.3% 37.5% 37.5% 38.4%

Gross income 40,705 19,788 84,824 60,390 38,850 18,779

Restructuring charges included in cost of sales 647 335 337 119 91 65

Gross income excluding restructuring charges 41,352 20,123 85,161 60,509 38,941 18,844

Net sales 105,328 49,750 227,216 160,843 103,716 48,906

Gross margin excluding restructuring charges (%) 39.3% 40.4% 37.5% 37.6% 37.5% 38.5%


Restructuring charges included in R&D expenses 188 -39 344 265 167 118

Restructuring charges included in selling and administrative expenses 149 5 117 87 66 23

Operating expenses excluding restructuring charges -32,251 -15,577 -63,754 -44,835 -30,737 -14,498

Operating income (loss) 8,157 4,306 10,564 4,439 8,635 4,896

Net sales 105,328 49,750 227,216 160,843 103,716 48,906

Operating margin (%) 7.7% 8.7% 4.6% 2.8% 8.3% 10.0%


Total restructuring charges 984 301 798 471 324 206

Operating income (loss) excluding restructuring charges 9,141 4,607 11,362 4,910 8,959 5,102

Net sales 105,328 49,750 227,216 160,843 103,716 48,906

Operating margin excluding restructuring charges (%) 8.7% 9.3% 5.0% 3.1% 8.6% 10.4%

2020 2019


EBITA and EBITA margin Earnings (loss) before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.

Cash conversion Cash flow from operating activities divided by the sum of net income (loss) and adjustments to reconcile net income to cash, expressed as a percentage.


Net income (loss) 2,585 2,280 4,484 -6,894 1,847 2,403

Taxes 1,558 1,124 1,570 2,013 1,451 1,888

Financial income and expenses, net -292 902 71 685 441 605

Amortization and write-downs of acquired intangibles 258 321 269 229 226 314

EBITA 4,109 4,627 6,394 -3,967 3,965 5,210

Net sales 55,578 49,750 66,373 57,127 54,810 48,906

EBITA margin (%) 7.4% 9.3% 9.6% -6.9% 7.2% 10.7%

2020 2019


Net income (loss) 4,865 2,280 1,840 -2,644 4,250 2,403

Taxes 2,682 1,124 6,922 5,352 3,339 1,888

Financial income and expenses, net 610 902 1,802 1,731 1,046 605

Amortization and write-downs of acquired intangibles 579 321 1,038 769 540 314

EBITA 8,736 4,627 11,602 5,208 9,175 5,210

Net sales 105,328 49,750 227,216 160,843 103,716 48,906

EBITA margin (%) 8.3% 9.3% 5.1% 3.2% 8.8% 10.7%

2020 2019


Net income (loss) 2,585 2,280 4,484 -6,894 1,847 2,403

Net income reconciled to cash 5,588 4,744 7,953 -4,320 4,952 5,481


Cash conversion (%) 97.5% 90.7% 6.2% -161.8% 73.2% 105.2%

2020 2019


Net income (loss) 4,865 2,280 1,840 -2,644 4,250 2,403

Net income reconciled to cash 10,332 4,744 14,066 6,113 10,433 5,481

Cash flow from operating activities 9,751 4,302 16,873 16,377 9,388 5,765

Cash conversion (%) 94.4% 90.7% 120.0% 267.9% 90.0% 105.2%

2020 2019


Gross cash and net cash, end of period Gross cash: Cash and cash equivalents plus interest-bearing securities (current and non-current). Net cash: Cash and cash equivalents plus interest-bearing securities (current and non-current) less borrowings (current and non-current).

Capital employed Total assets less non-interest-bearing provisions and liabilities.

Capital turnover Annualized net sales divided by average capital employed.

SEK million Q2 Q1 Q4 Q3 Q2 Q1

Cash and cash equivalents 45,655 48,347 45,079 51,183 45,498 45,453

+ Interest-bearing securities, current 5,739 7,834 6,759 5,866 6,367 3,183

+ Interest-bearing securities, non-current 24,025 23,335 20,354 19,157 17,091 23,022

Gross cash, end of period 75,419 79,516 72,192 76,206 68,956 71,658

- Borrowings, current 15,290 17,759 9,439 1,622 2,160 3,015

- Borrowings, non-current 22,581 23,381 28,257 37,153 33,040 32,533

Net cash, end of period 37,548 38,376 34,496 37,431 33,756 36,110

2020 2019


Total assets 276,778 292,307 276,383 288,531 280,447 283,958

Non-interest-bearing provisions and liabilities

Provisions, non-current 2,240 2,703 2,679 2,308 2,646 2,670

Deferred tax liabilities 1,164 1,060 1,224 857 1,178 792

Other non-current liabilities 1,813 2,178 2,114 2,163 2,160 2,118

Provisions, current 8,363 8,357 8,244 19,699 8,712 9,363

Contract liabilities 31,532 34,265 29,041 34,499 37,264 38,605

Trade payables 32,182 29,840 30,403 30,672 31,388 30,842

Other current liabilities 34,834 40,521 37,405 34,624 33,351 38,528

Capital employed 164,650 173,383 165,273 163,709 163,748 161,040

2020 2019


Net sales 55,578 49,750 66,373 57,127 54,810 48,906

Annualized net sales 222,312 199,000 265,492 228,508 219,240 195,624

Average capital employed

Capital employed at beginning of period 173,383 165,273 163,709 163,748 161,040 149,615

Capital employed at end of period 164,650 173,383 165,273 163,709 163,748 161,040

Average capital employed 169,017 169,328 164,491 163,729 162,394 155,328

Capital turnover (times) 1.3 1.2 1.6 1.4 1.4 1.3

2020 2019


Net sales 105,328 49,750 227,216 160,843 103,716 48,906

Annualized net sales 210,656 199,000 227,216 214,457 207,432 195,624





Capital turnover (times) 1.3 1.2 1.4 1.4 1.3 1.3

2020 2019


Return on capital employed The annualized total of operating income (loss) as a percentage of average capital employed.

Equity ratio Equity expressed as a percentage of total assets.

Return on equity Annualized net income (loss) attributable to owners of the Parent Company as a percentage of average stockholders’ equity.



Annualized operating income (loss) 15,404 17,224 24,500 -16,784 14,956 19,584





Return on capital employed (%) 9.1% 10.2% 14.9% -10.3% 9.2% 12.6%

20192020



Annualized operating income (loss) 16,314 17,224 10,564 5,919 17,270 19,584





Return on capital employed (%) 9.9% 10.2% 6.7% 3.8% 11.0% 12.6%

2020 2019


Total equity 78,472 79,113 81,878 77,475 84,533 84,532

Total assets 276,778 292,307 276,383 288,531 280,447 283,958

Equity ratio (%) 28.4% 27.1% 29.6% 26.9% 30.1% 29.8%

2020 2019


Net income (loss) attributable to owners of the Parent Company 2,452 2,156 4,430 -6,229 1,705 2,317

Annualized 9,808 8,624 17,720 -24,916 6,820 9,268

Average stockholders' equity

Stockholders' equity, beginning of period 79,841 82,559 78,200 84,488 84,619 86,978

Stockholders' equity, end of period 79,005 79,841 82,559 78,200 84,488 84,619

Average stockholders' equity 79,423 81,200 80,380 81,344 84,554 85,799

Return on equity (%) 12.3% 10.6% 22.0% -30.6% 8.1% 10.8%

2020 2019


Net income (loss) attributable to owners of the Parent Company 4,608 2,156 2,223 -2,207 4,022 2,317

Annualized 9,216 8,624 2,223 -2,943 8,044 9,268

Average stockholders' equity

Stockholders' equity, beginning of period 82,559 82,559 86,978 86,978 86,978 86,978

Stockholders' equity, end of period 79,005 79,841 82,559 78,200 84,488 84,619

Average stockholders' equity 80,782 81,200 84,769 82,589 85,733 85,799

Return on equity (%) 11.4% 10.6% 2.6% -3.6% 9.4% 10.8%

2020 2019


Earnings (loss) per share (non-IFRS) Earnings (loss) per share, diluted, excluding amortizations and write-down of acquired intangible assets and excluding restructuring charges.

Free cash flow and free cash flow before M&A Free cash flow: Cash flow from operating activities less net capital expenditures and other investments. Free cash flow before M&A: Cash flow from operating activities less net capital expenditures and other investments (excluding M&A).

Isolated quarters, SEK Q2 Q1 Q4 Q3 Q2 Q1

Earnings (loss) per share, diluted 0.74 0.65 1.33 -1.89 0.51 0.70

Restructuring charges 0.14 0.07 0.07 0.04 0.02 0.05

Amortization and write-downs of acquired intangibles 0.06 0.07 0.06 0.05 0.06 0.05

Earnings (loss) per share (non-IRFS) 0.94 0.79 1.46 -1.80 0.59 0.80

2020 2019

Year to date, SEK Jan-Jun Jan-Mar Jan-Dec Jan-Sep Jan-Jun Jan-Mar

Earnings (loss) per share, diluted 1.39 0.65 0.67 -0.67 1.21 0.70

Restructuring charges 0.21 0.07 0.18 0.11 0.07 0.05

Amortization and write-downs of acquired intangibles 0.13 0.07 0.22 0.16 0.11 0.05

Earnings (loss) per share (non-IRFS) 1.73 0.79 1.07 -0.40 1.39 0.80

2020 2019



Net capital expenditures and other investments (excluding M&A)



Product development -211 -262 -329 -313 -446 -457


Repayment of lease liabilities -618 -596 -711 -1,052 -623 -604

Free cash flow before M&A 3,236 2,315 -1,887 4,459 1,604 3,457


Free cash flow 3,191 2,107 -3,228 3,993 1,607 3,756

2020 2019


Cash flow from operating activities 9,751 4,302 16,873 16,377 9,388 5,765

Net capital expenditures and other investments (excluding M&A)



Product development -473 -262 -1,545 -1,216 -903 -457


Repayment of lease liabilities -1,214 -596 -2,990 -2,279 -1,227 -604

Free cash flow before M&A 5,551 2,315 7,633 9,520 5,061 3,457


Free cash flow 5,298 2,107 6,128 9,356 5,363 3,756

2020 2019

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